Knowing your Market is essential to determining your market dominating position and identifying "pain points" to target your marketing or as O like to say with my clients, "potential for innovation." The Balance Small Business has shared this useful piece on conducting market research. If you have not yet identified your niche and determined how to stay on top f your customer needs you could risk becoming redundant or losing market share.
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Market research is the collection and analysis of information about consumers, competitors and the effectiveness of marketing programs.
While market research is crucial for business startup, it's also essential for established businesses to increase profits. It's accurate information about the marketplace, the target market (customers) and the competition that allows the development of a successful marketing plan.
How Do Businesses Use Market Research?
Business owners use market research to:
- Determine the feasibility of a new business. Market research is an essential component of a business plan for startup businesses - if market research does not indicate a demand for the product or service the proposed business will not likely be viable.
- Test interest in new products or services to respond to customer needs.
- Find and develop new markets.
- Monitor industry and economic trends and develop strategies to adapt the business to the changing environment.
- Determine optimal product placement - when, where, and how should a product or service be distributed.
- Improve aspects of their businesses, such as customer service.
- Monitor the competition - checking competitors ads, websites, social mediacampaigns, etc. to see how they may be attempting to capture some of your market share.
- Develop competitive strategies - for example, setting competitive pricing for products or services or determining how your products/services and customer service compare to the competition.
- Develop optimal strategies for promotion - how to get the message out to the target market via branding, traditional advertising and/or social media, etc.
How is Market Research Conducted?
There are several ways that market research is conducted, including:
- Customer surveys - These are conducted in various ways, including online, one-on-one interviews, "Satisfaction Surveys", and phone calls. Traditional phone surveys are on the decline due to cost and the low rate of response (most people find them irritating). Many businesses provide a short customer feedback form in a prominent location on the premises (or provided with invoices) so customers can record their comments.
- Web-savvy businesses use their online presence to conduct market research by encouraging customer feedback on business websites and social media (a short web-based questionnaire about your products and services is a simple, inexpensive, and effective way to survey customers. Make sure the survey is usable from mobile devices). Social media platforms such as Facebook, Twitter, LinkedIn, etc. provide a dialogue between you and your customers so that you can receive immediate feedback on product and service offerings and make your customers feel like you value their opinions. Unfortunately social media campaigns can also backfire - statistically people are more likely to post negative comments or reviews than positive ones. Poor customer service and negative product reviews can lead to widespread criticism on social media and be disastrous for businesses.
- Product trials or usability studies - Providing samples of new products to customers in a live setting and gauging response. Direct customer feedback can be used to make changes to the product as required or determine optimal pricing. Product trials are ideally suited for businesses such as food service establishments who wish to test new menu items.
- Focus groups - These are organized sessions with groups of people where a scripted topic or Q&A discussion with a moderator takes place. Focus groups can collect very useful information but are a difficult to organize and expensive method of market research for small businesses. Focus groups are increasingly conducted online.
- Direct observation - This involves watching or video recording customers in a natural setting (such as a store front) to see how they respond to displays of products or services. Note that for privacy reasons direct observation by video can only be conducted in a public setting unless the person being surveyed is aware of being video recorded. Direct observation has advantages in that for the purposes of collecting information the customer is behaving naturally (rather than possibly responding in a contrived fashion as they might with another form of survey), but it is a very time-consuming method of market research.
While it's common for businesses to hire market research companies to conduct market research for them, it is possible for small business owners to do their own. For an explanation of the basics of market research and tips on designing your own market research surveys and questionnaires, see Do-It-Yourself Market Research.
Examples of Changes Driven by Market Research
After several quarters of declining sales McDonald's executives decided in 2015 that major changes were required to combat the public perception of McDonald's products as being unhealthy. Based on market research, the company made menu changes and no longer sells chicken products containing human antibiotics or other ingredients such as phosphates and maltodextrin. Other changes include the addition of more salad choices and healthier desserts including apple slices.
For years Lego was an enormously successful product with young boys, but was popular with only 10% of female children. In response, Lego conducted a huge four year market research campaign with over 3500 young girls, resulting in a new product line featuring vibrant colors and different figurines. The new products became a huge success and the share of female Lego users increased sharply.
Source: The Balance Small Business
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